First Time Buyers
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First Time Buyers
What is a First Time Buyer mortgage and what’s involved in finding a mortgage as a First Time Buyer?
A First Time Buyer is basically someone who has never owned a property before. In terms of the typical requirements, all mortgage lenders would need you to have some sort of income.
It might be from employment or self-employment – and sometimes even people can use benefit income or other sources. That’s something we can delve into with you. Lenders look at your income to calculate what you could afford to borrow.
To get a mortgage with a main high street lender you would need to have a fairly good credit file, with no missed or late payments on it. Hopefully there will be no defaults on there.
These are things that we would look into, because each lender has different criteria. Some lenders might be okay with two missed payments in the last year and nothing more. Or they might accept a default that has been settled.
So generally, if you’ve got an income, you can come to us here and we’ll look at the situation and your credit file and everything else in your scenario.
What is the maximum amount that can be borrowed for a mortgage as a First Time Buyer? What’s the minimum deposit required for a First Time Buyer?
As a First Time Buyer, there’s no official maximum amount. It depends on many factors – how strong your income is, your commitments in the background and the deposit amount.
The minimum deposit amount is 5%, but lenders do have lending limits. For example, if you’ve got a 5% deposit the credit scoring is stricter, because there’s a higher risk there.
With lending limits the amount you can borrow might be lower – so generally between £600,000 or £750,000 would be the absolute maximum. But as your deposit gets bigger – if you have 10% or 15% for example – and your income is pretty high, you’d be able to borrow more than £1,000,000, depending on your income and commitments.
What are the pros and cons of fixed versus variable interest rate mortgages for First Time Buyers?
The main positive of a fixed rate is that you have stability in your monthly payments. You know exactly what’s going out of your account every month. It means you’re more secure.
The negative with a fixed rate is that you fix in for a certain period – two or five years, or longer. If rates come down during that period, you might be stuck on a higher rate until the end of the fixed period. Generally, you’d have to pay an early repayment charge to come out of that fixed rate early.
With a variable rate such as a tracker, which tracks the Bank of England base rate, the positive is that if the rate drops, so does your mortgage rate. That will make your monthly mortgage payment cheaper.
Generally you’re not tied in with that, which is another positive. You can come out of the deal whenever you want. On the negative side, if interest rates rise then so would your tracker rate. You have no stability on your monthly payments, so if rates go up, so does your monthly payment.
What is an Agreement in Principle and do I need one?
An Agreement in Principle is an initial affordability check based on your financial situation. It’s not a guarantee of a mortgage, but it’s an initial lender check on your income and commitments and a statement of the maximum borrowing you could get.
You don’t have to have one, but some estate agents do ask for it. It’s a quick process to do for you if that’s required.
What documents do I need to get preapproved for a mortgage as a First Time Buyer?
If you’re employed, you need the latest three months pay slips. If you have a bonus annually or quarterly, most lenders would need two years’ worth of your bonus pay slips. Some lenders are okay with one year’s bonus.
If you own more than a 25% shareholding of a business, you’re classed by lenders as self-employed. If you’ve been trading for three years or more, we need the latest three years of your SA302 tax calculations and tax year overviews.
Certain lenders are okay with one year’s trading, in which case you don’t need as much paperwork.
Whether you’re employed or self-employed, we also need your latest three months bank statements and either a licence or passport for ID purposes – that’s pretty much it.
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Buying a new home can be a stressful time for anyone. Our job here at Brick2Brick Mortgage Solutions is to make the process a lot easier, taking the stress out and making the clients journey smooth and so much more.
What are the steps when applying for a mortgage as a First Time Buyer?
You can contact us here to find out what your maximum borrowing potential is, so then you know what property values to look at. When you find something you like, you can put an offer in on that property.
When they accept your offer, we will gather your employment details and property details and find the most suitable mortgage option for you. We’ll then apply with all the documents we have on file.
After that, we keep you updated all the way through, so you know exactly what’s happening. After the lender has valued the property and assessed the documents it will go to mortgage offer, and then the solicitors take over.
This is where we can help move things forward, especially if you use one of our recommended ones. If you choose to use your own solicitor it’s more difficult for us to get involved. But these are things we can discuss. Also, if your estate agent has any questions for us, we’re always available.
What are the most common mistakes to avoid when applying for a mortgage as a First Time Buyer?
Taking out extra credit can be an issue. Whatever you’ve already disclosed would have already been taken into account in the affordability calculation to work out what you can borrow. So if you take extra credit, that affordability would come down.
Even when you’ve already put in an application, before completion the lender often checks your credit file. If you have taken out extra credit they could decline the case or decrease the lending amount. That’s a massive one to be aware of.
Sometimes clients won’t realise that they need more than just a deposit for property. You need to make sure you’ve got enough to cover solicitors’ fees, removal costs and any extra surveying that you want to take out.
Also, you might not want just a basic property valuation with a lender – you might want a structural survey or something more detailed for peace of mind. Other professional fees need to be considered.
Quite often people go hunting for property without coming to us first to find out what their maximum borrowing is. That can mean a lot of wasted time. You look at all these properties but if it won’t fit affordability with the lender, you can’t get a mortgage.
Coming to us first is crucial to make sure you’re viewing the right properties. We can get you an Agreement in Principle so you have real peace of mind about your budget.
What happens if I miss a payment on my mortgage as a First Time Buyer?
Whether you’re a First Time Buyer or anyone with a mortgage, it’s not great. A missed mortgage payment doesn’t look good from a lender’s perspective.
You would need to have a clear run of at least six months before applying with lenders for a future mortgage. Even then you probably wouldn’t get accepted by a main high street bank. We deal with over 90 lenders so we would find you someone, but the interest rate could be higher.
How can a mortgage broker help me with my First Time Buyer mortgage application?
There are quite a few steps as we’ve talked about. We will find you a suitable mortgage deal, and even after the application and mortgage offer, if there are any issues with the legal side or anything we will step in and help move things along.
Our job isn’t finished until you move into your first home. We can recommend solicitors that will help keep the process as smooth as possible, all the way to the day you move in. It’s sometimes going to take up to three months depending on certain things, so let us help you along the way.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
